Promissory Note Sample: What to Look For
Are you a private lender or seller who could benefit from a quality promissory note sample—a type of template with which to create your own loan document? Did you know that there are now many online websites that offer these types of business-related documents, including many who offer a sample promissory note at no charge to the user? As a private lender or seller, the only security you have against a potential default on a loan you initiate is a promissory note. This document serves the very important purpose of legalizing the transaction, thus enabling you to seek recourse through the court system should the borrower fail to keep up his or her end of the bargain. And while many people will seek an attorney to draw up this contract, an increasing number of people are now turning to the Internet for a quality promissory note example. To help get you started, in this article we will provide a brief definition of the promissory note and its purpose, and highlight some of the main elements to look for when borrowing a promissory note sample from an online website.
Promissory Note Sample: Defining the Promissory Note
If you think back to the last time you bought an expensive item on credit, say, an automobile, you will probably remember signing a loan document or contract. This document laid out all the terms of the loan, including the total amount being borrowed, the amount and due dates of the payments, and the interest charges that would apply each month. A promissory note is very similar to a loan contract, although a little less formal.
Simply put, a promissory note is a document that serves as a formal I.O.U, a promise to pay, initiated between a lender and a borrower. It, too, is a legal contract, one that guarantees you will be repaid by the borrower at some future date, outlining the schedule of repayment, including any interest charges that will apply. It is used regularly by private lenders when loaning money, and by people who are selling an item for which the buyer does not have the full amount on hand. By signing the document, the borrower is entering into a legal contract, and should that borrower default on any of the provisions within the promissory note, you, as the lender, can sue for damages in a court of law, often recovering not only the amount of the loan, but all court fees as well.
Sample Promissory Note: What to Look for When Selecting a Promissory Note Example
As mentioned above, today there are literally hundreds of online websites that now offer templates for business and loan documents, including scores on which you can find a promissory note example that suits your unique purposes. These documents typically contain all the required elements and legal language needed to ensure the enforceability of the contract, and can be finely tweaked and personalized to match your specific loan purpose. However, before you make a final decision regarding which promissory note sample to use, check it over carefully to make sure it contains, at minimum, the following elements:
• Lender or Seller Name and Contact Information. When borrowing a sample promissory note from an online source, it’s important the document has the appropriate spaces and headings to list the lender’s name and all of his or her contact information. This includes physical and mailing address, business and mobile telephone numbers and email address. This information is necessary, especially in the event the borrower needs to contact you with questions about the loan.
• Borrower or Buyer Name and Information. Even if you are loaning money to a friend and you already know his or her address, the promissory note example you choose should still have ample space to record all of this information. This includes their full address, contact information and social security number—the unique 9-digit number used by the Internal Revenue Service.
• Amount Borrowed or Principal Amount. The amount borrowed or principal amount portion of the promissory note sample is where you will record the original total of the loan. This does not include any interest charges.
• Interest. In this section of the promissory note sample you will need to list both the interest rate and the total amount of interest being charged over the life of the loan.
• Repayment Terms. The repayment terms will include all of the following: payment amounts, payment due dates and the final date on which the balance should be paid off in full.
In the final section of the promissory note sample you will want to look for signature lines on which the document can be executed. This includes lines not only for the lender and borrower, but for at least one to two witnesses as well.